Costs associated with buying a property found to be £875 a year cheaper than renting.
Buying a property is now almost £900 a year cheaper than renting, according to a new report from Halifax, which suggests that the financial benefits of homeownership now significantly outweigh those associated with being a tenant.
According to the report, UK consumers are £875 a year better off buying their own home instead of renting.
The average monthly costs associated with buying a three-bedroom house stood at £672 in June 2013, which is £73, or 10%, lower than the typical monthly rent of £745 paid on the same type of property.
Although the the percentage difference between the monthly cost of buying and renting has fallen marginally from 12 months ago, the difference is substantial when compared with five years ago, when renting was far more financially attractive than buying.
In June 2008, the average monthly cost associated with home buying was £352, or 49%, higher than renting – which was equivalent to an annual cost difference of £4,226.
According to Halifax, the significant improvement in the affordability of buying compared to renting over the past half a decade reflects the 37 per cent decline in home buying costs since 2008.
Falling mortgage rates are another key factor in house buying being more attractive, with the average mortgage rate for a new borrower falling by 2.31% over the past five years, from 5.88% in June 2008 to 3.57% in June 2013.
Furthermore, the average property value in the UK has fallen by 13% over the same period, while typical rents have increased by the same figure since June 2010 – equivalent to 13%, or £88 a month.
Variety of factors
“A combination of lower mortgage rates and declining house prices has substantially reduced the cost of buying over the past six years. Nevertheless, the number of home buyers in the 12 months to June 2013 was nearly half of that in 2008, which will have been constrained by worries over job security,” said Martin Ellis, housing economist at Halifax.
In spite of the the overall improvement in mortgage affordability, the number of buyers in the UK housing market in the year to June 2013 was 44% lower than in the same period in 2008, falling from 1,711,000 to 959,7704.
However, there are signs of improving market activity, with the number of property buyers rising by 3% this year compared with the 12 months to 2012.
Mr Ellis added: “We understand that building a deposit is still a key challenge for those looking to get on the ladder, although once this has been achieved, buying is much more affordable.
There does seem to be light at the end of the tunnel, as the average deposit put down by home buyers has grown to £40,628 in June 2013, up from £38,893 a year earlier; this data is complemented by further statistics showing that sentiment regarding the housing market has improved significantly in recent months.
The increase is partly due to house prices picking up in 2013, though worries over job security and raising a deposit remain key obstacles to market activity.
According to Mr Ellis, the increase in optimism in the housing market in recent months is welcome, but these factors remain key obstacles to home purchases, and will remain so until the market returns to its former heights.